8 steps to better cashflow for marketing & digital marketing agencies
Whether we have enough money in the bank to pay our staff and freelancers and to invest in the growth of our business can be a big concern for marketing agencies.
So here are 8 steps you can take to enhance your cashflow.
Review your pricing
When was the last time you reviewed your pricing strategy for your business? If the answer is more than 12 months ago then it’s time to review.
Have you any idea how your competitors charge for the services you provide?
Are you getting sufficient margin on the individual projects you are carrying out for your clients?
If you don’t know the answer to either of these questions, then you will want to find out.
Reviewing your pricing can mean increasing some of the pricing but it also sometimes just packaging your products and services in different ways
Review your customer and supplier payment terms
As our businesses evolve, we may change the types of customer we work, with the types of services we provide and the environment in which we work also changes. You may therefore want to review your customer payment terms. You may have contracts with particular customers which are longer than 30 days due to the nature of your business – think about how for future contracts or on renewing these contracts you could reduce the payment days for your invoices.
How many days do you normally pay your suppliers and sub contractors within? If you are paying invoices as they come in or weekly then you are very likely to be paying money out of the business much more quickly than it is coming into you. Hence, one of the reasons your cashflow is suffering. Be disciplined and do suppliers payments just once a month, or if the payment terms with some suppliers can be extended, then pay to these dates. There may of course be exceptions to this – for example, we often see freelancers of the digital marketing agencies we work with wanting to be paid in advance or straightaway and not wanting to fit into a monthly payment cycle.
Take more money up front
How much more money could you take up front? So, for example, if you are delivering a new website for a client, you don’t want to wait until the project is completed to invoice your client and we often see a 3 or 4 staged payment approach being taken. This way then the money is there and ready to cover your initial costs and then the final invoices are issued when the project is completed.
If you are doing this already, then have a look at the proportions of the project cost you are allocating to each stage and see if you can bring more money into your business earlier.
It is important of course to have this documented very clearly for your customers at the outset so they are aware of the milestones and payment expectations.
Make it easy for customers to pay straightaway
You can do this by;
- Invoicing customers straightaway and don’t wait and invoice them at the end of the month.
- Get as many customers as possible to pay by direct debit. If this is part of your initial terms of business, there won’t be many businesses who won’t agree to this. This approach gives you control of when you receive the payment and you can ensure that payment terms are met.
- Taking other payments by bank transfer and credit card and don’t accept cheques and put the details or a link on your invoice.
Control staff spending
As an agency grows, we often see business owners delegating some aspects of spending to members of their team – the spend is often on contracting freelancers or purchasing sofware to deliver on projects.
However, those trusted staff need to be given limits on what they can spend without authorisation and should only be paying freelancers when projects are fully completed and the costs can be invoiced on to the client.
The business owner may have delegated this operational responsibility but will still need and want to ensure that they spot check and oversee what is being spent in their business. If there are cashflow challenges in the business at anytime, then the staff obviously need to be made aware so they can manage this through a difficult period as a team.
Have regular and structured credit control in place
Dedicated time spent on a weekly basis chasing unpaid invoices is an excellent use of time. If you don’t have the time then use someone from within your staff team or an external bookkeeper or credit controller to do this for you.
Remaining professional, friendly and consistent in your approach is your key to success.
The bookkeeping software can be used to email reminders and statements to your customers and doing this, combined with putting in a polite and professional call to your customer to resolve any problems or issues, will show your customers that you are organised and diligent and committed to collecting payment. Ask your customers for the date your invoice will be paid and let them know that you will give them a call again next week if it’s not been received.
You will reap the rewards and you will be able to see the amount of days your customers pay within reducing considerably.
This is something you can do yourself or you may want to get the help of your bookkeeper or accountant. It can be done on a simple spreadsheet or on more sophisticated software whichever suits you best. The main thing is to make sensible projections so that you can plan certain expenditure to take place at the best times.
This enables you to anticipate potential cashflow issues and plan to minimise these.
You can look ahead to when you want to employ your next member of staff or other investments in growing your business and ensure that your cashflow can handle this additional expenditure.
Minimise work in progress
You will always have a certain amount of work in progress taking place within your agency. However, it is critical to manage this effectively and to avoid having lots of incomplete projects at one time. To deliver a great service to your customer, you will want to get projects completed as soon as possible anyway but delays also have a direct impact on the cashflow in your business.
Put a monetary value on your work in progress as of now and then set a target for the team to reduce this. Once you have achieved your target, monitor and maintain your work in progress level.
Of course there will be some factors outside of your control – clients not providing you with what you need for example – and so managing clients to keep projects moving forward and to agreed timescales is a skill in itself.
There are massive benefits of having positive cashflow in your business and it is important to avoid complacency as lack of cash can kill your business. So we hope that you will have found something in this blog to help the cashflow in your business.
We look forward to hearing your comments on this blog and hearing about other ways in which you have seen businesses succeed in bringing more cash into their business.
We work with many marketing and digital marketing agencies and so if you think we can help in anyway, please contact us at The Bookkeeping Department on Tel: 01462 455455 or join our mailing list below.